Corporate Dec 11, 2012
New Delhi: By extending its code share deal with Etihad Airways today, Jet Airways has taken a small but crucial step forward in forging a deeper alliance with the Abu Dhabi based airline.
Amid speculation that Etihad is talking to Jet's rival Kingfisher Airlines for a possible equity partnership, Jet today quietly announced expansion of its existing code share agreement where it has begun placing its code on Etihad's flight operating out of Abu Dhabi to Paris Charles de-Gaulle airport with effect from yesterday. On the face of it, this codeshare allows Jet Airways to offer its guests connectivity from India to Paris via Abu Dhabi.
But in effect, this could be the stepping stone to an equity deal between the two airlines eventually. Kapil Kaul of Centre for Asia Pacific Aviation was in no doubt that a deal is on the horizon.
He told Firstpost that "the first step is a code share and a structured alliance between Jet and Etihad. Second step could be, subject to valuations, a minority equity investment."
Kaul pointed out that Etihad's strategy has been to forge deep rooted, structured alliances with other airlines and it may follow the same path in the case of Jet Airways.
Jet said in a statement that as per the new codeshare agreement, its flight code 9W6120/9W6121 will be placed in Etihad Airways flights EY 031/032 daily operating from Abu Dhabi to Paris Charles de-Gaulle airport.
This codeshare to Paris is in addition to the existing codeshare between Jet Airways and Etihad Airways on the Abu Dhabi- Mumbai/Delhi routes operated by Jet Airways, and the Abu Dhabi Mumbai / Delhi / Cochin / Thiruvananthapuram / Kozhikode / Chennai / Hyderabad routes operated by Etihad.
Kaul of CAPA said that Etihad may not immediately buy any equity in Jet since the reported valuation of $1.7 billion may not be ideal for it. But the two airlines will gradually deepen their partnership by forging alliances in the areas of marketing and route network before working out any equity deal.
He indicated that to begin with, Etihad will pick up a minority equity stake in Jet Airways before taking it up to 49%. "If equity investment gets scaled up to 49 percent, then Jet could potentially delist from the stock exchanges," Kaul said.
So what happens to the rumoured Kingfisher-Etihad deal? A former senior employee at Kingfisher pointed out that talks may be ongoing but unless Kingfisher's Mallya throws other enticements in the ring, Etihad may not bite this bait. He was referring to Etihad's keen interest in the F1 franchise in its home country and any possible synergies that the Abu Dhabi based carrier may find in taking Mallya's F1 franchise in India.
He also spoke of how, if one were to consider purely the comparative brand value of Kingfisher versus Jet, the former could win hands down. But will Etihad really be after the brand and not after assets, route network and infrastructure? This remains to be seen.
But for now, an alliance between Jet and Etihad has not been ruled out despite Kingfisher spoiling the party.
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